Financial sector reform
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Exit from comment view mode. Click to hide this space Comments View/Create comment on this paragraph BERKELEY – Back in the late 1990’s, in America at least, two schools of thought pushed for more financial deregulation – that is, for repealing the legal separation of investment banking from commercial banking, relaxing banks’ capital requirements, and encouraging more aggressive creation and use of derivatives. If deregulation looks like such a bad idea now, why didn’t it then? Comments View/Create comment on this paragraph The first school of thought, broadly that of the United States’ Republican Party, was that financial regulation was bad because all regulation was bad.
Confessions of a Financial Deregulator - J. Bradford DeLong - Project Syndicate
Romney’s Lead Economist Urges Policies that will Cause the Next Financial Crisis « naked capitalism
Bill Black, the author of The Best Way to Rob a Bank is to Own One and an associate professor of economics and law at the University of Missouri-Kansas City. Cross posted from New Economic Perspectives . Presidential nominees of either U.S. party can secure economic advice from any economist in the world. This makes it all the more amazing and sad that they choose economists with track records of disastrous policy advice.
The latest round of international financial regulations – known as Basel III – is making important steps towards a safer financial system. However, we believe it ignores a key aspect of systemic risk – the lack of diversity across financial institutions. While up to a few decades ago the financial system consisted of predominantly small institutions that specialised in different businesses and had relatively few interlinkages with each other, this picture has dramatically changed.
Regulators should encourage more diversity in the financial system | vox - Research-based policy analysis and commentary from leading economists
10 Steps To Prevent the Next Bank Crisis | The Big Picture
Look, this is really simple stuff : As I discussed yesterday on Dylan Ratigan , we can easily prevent the next credit crisis caused by a TBTF banks (and the rogue traders they employ), we need to take 10 EZ steps: 1.Stacy Mitchell: Why Republicans Hate Warren's CFPB But Love Another Bank Regulator
Stepping up their attacks on Elizabeth Warren and the new Consumer Financial Protection Bureau this week, House Republicans painted a picture of an all-powerful agency -- Financial Services Chairman Spencer Bachus called it "the most powerful agency that's ever been created in Washington"-- whose director will rule the banking industry by fiat, be accountable to no one, and even determine her own budget. Many have already pointed out how factually untrue these claims are ( here , here , and here ). What's also striking about them is how accurately they describe another financial regulator, the Office of the Comptroller of the Currency (OCC). The OCC is the nation's top dog in charge of overseeing banks. Its powers are vastly broader than those of the CFPB and subject to far less oversight.
The banking crisis of 2008-2009 was very costly to national public finances – in some countries, it was ruinous. As governments try to regain their fiscal footing, the spotlight naturally turns to the fiscal contribution made by the financial sector. There are several reasons to believe that banks are currently under-taxed. Their crises have large negative effects on the overall economy, they benefit from underpriced bail-out guarantees, they receive cheap central-bank funding, and, not least, in the EU they enjoy low value-added taxation (VAT) in the form of the VAT exemption. 1
Why banks are under-taxed and what to do about it | vox - Research-based policy analysis and commentary from leading economists
Financial regulation overhaul: Same tired arguments - latimes.co
Every time I hear a big industry crab about how some new set of government regulations will mean the end to life as we know it, bring the economy crashing down around our heads, or burden the consumer with more passed-on costs, I think of the smartest words ever spoke. They were: " There you go again." Reagan and I wouldn't have seen eye to eye on much, but this phrase sums up my exact reaction to the arguments by the financial industry and its chums in Washington against the financial regulation bill now before Congress. It's not just that they're opposed to any new initiatives — that's just industry doing what comes naturally. It's the dismal sameness of the arguments, decade after decade, that gets to me. The bankers' brief against regulation today is that the reforms will stifle economic recovery, hamper sound investment, create an uncontrollable government bureaucracy, and overburden small businesses.
Banks Should Welcome Rules - Room for Debate - NYTimes.com
There is nothing costlier to banks than causing financial regulation to fail. Deregulation, desupervision and de facto decriminalization plus perverse compensation create the environments that drive our recurrent, intensifying financial crises. The costs of regulation are trivial relative to the costs of an economic crisis like the recent one. After one of those past crises, George Akerlof and Paul Romer ended their 1993 article on “looting” with this hopeful note: “Neither the public nor economists foresaw that the [deregulation of savings and loans was] bound to produce looting. The regulators … who understood what was happening from the beginning found lukewarm support, at best, for their cause. Now we know better.Even as headlines remain dominated by the Eurozone crisis, the financial world is transforming itself along multiple other dimensions. One intriguing but so far little-noticed development is the gradual shift in the role of global financial standard-setters, which are becoming more assertive in looking at how their standards are adopted and implemented around the world. Global financial standards have emerged since the 1970s as a by-product of global financial integration. While some global bodies set norms for small and arcane corners of finance, two cases stand out for the magnitude of their impact on financial firms’ operations and incentives: the successive agreements reached by the Basel Committee on Banking Supervision, or Basel Accords; and International Financial Reporting Standards (IFRS), which govern the preparation and presentation of listed companies’ financial statements and are set by the London-based International Accounting Standards Board (IASB).
A new era for global financial standards | vox - Research-based policy analysis and commentary from leading economists
The fallacy of financial regulation: neglect of the shadow banking system | Economists' Forum | Economics blog from the Financial Times – FT.com
By Michael Pomerleano The message of this article is straightforward. In response to the crisis, the reforms in financial regulation address threats to the banking system by increasing capital and providing for liquidity in the banking system. This article argues that the measures miss the point of the recent crisis. The liquidity crisis in the shadow banking system was a major source of financial and economic instability. Liquidity grew within in the shadow banking system, and once liquidity evaporated, fire sales lead to downward revaluations of collateral assets.
Thank you and happy New Year. It is a pleasure to be with you today as you meet to discuss so many pressing and important issues. I know there has been much discussion at this conference about the public function of law schools and I commend you for tackling this essential challenge.
Creating and Implementing an Enforcement Response to the Foreclosure Crisis | The Big Picture
Sorkin's Glass-Steagall straw man
There is no single “cure for crisis.” Period. And nobody anyone pays attention to is actually saying there is. Here’s the nut of Sorkin’s argument: A meme around Glass-Steagall has been created, repeated so often that it has almost become conventional wisdom: the repeal of Glass-Steagall led to the financial crisis of 2008.Our story thus far : The Commodity Futures Modernization Act of 2000 , sponsored by Texas Senator Phil Gramm as a favor to his wife Wendy (who sat on the Board of Directors of Enron, which wanted to trade energy derivatives without oversight) was rushed through Congress in 2000. Unread by Congress or their staffers, it was signed into law by President Bill Clinton on the advice of his Treasury Secretary Lawrence Summers. The CFMA radically deregulated derivatives. The law changed the Commodity Exchange Act of 1936 (CEA) to exempt derivatives transactions from regulations as either “futures” (under the CEA) or “securities” under federal securities laws.
Credit Default Swaps (CDS) Are Insurance Products, Not Tradeable Assets | The Big Picture
capital adequacy ratios
Congressional Democrats went ahead and wrote the trading prohibition into Dodd-Frank, the sweeping overhaul of the nation's financial rules pushed through last July. But now, behind closed doors, financial agency powerbrokers are jockeying over how to implement the law, a process turning out to be as bitterly contentious and politicized as passing Dodd-Frank in the first place. Government officials -- including Williams and the OCC -- are inserting exemptions as they formulate rules to enforce the law. Some regulators, facing severe budget constraints, caution that they may not be able to carry out some of its key provisions. Foes of the law in Congress, and even some former friends, are voicing concern that aspects of the law could erode American competitiveness.
From Dodd-Frank to Dud: How Financial Reform May Be Going Wrong - ProPublica
Financial Reform: Unfinished Business by Paul Volcker | The New York Review of Books
It should be clear that among the causes of the recent financial crisis was an unjustified faith in rational expectations, market efficiencies, and the techniques of modern finance. That faith was stoked in part by the huge financial rewards that enabled the extremes of borrowing, the economic imbalances, and the pretenses and assurances of the credit-rating agencies to persist so long. A relaxed approach by regulators and legislators reflected the new financial zeitgeist. All the seeming mathematical precision that was brought to investment, all the complicated new products, including the explosion of derivatives, that were intended to diffuse and minimize risk, did not work as had been claimed. Instead, the vaunted efficiency helped justify an explosion of weak credit and an emphasis on trading along with exceedingly large compensation for traders.Taxation des transactions financières
Basel III